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Agency - Finer Details in The Indian Context
Agency - Finer Details in The Indian Context
Powers of an Agent:
An agent has authority to do all acts and things, which are expressly given to him but he has also implied
authority to do all acts which are incidental to the main powers. S. 189 of the Indian Contract Act, 1872
provides that an agent also has powers to do all acts for the purpose of protecting the principal in emergency
as would be done by a man of prudence in his own case. An agency can be granted orally or through writing
and it can also be created through subsequent ratification of the acts done by one person for the other.
To conduct the business of the principal according to the directions given by the principal;
2.
To conduct business of the agency with as much skill as is generally possessed by persons engaged in
similar business and to act with reasonable diligence and to make compensation to the principal in
respect of the direct consequences of his own neglect for want of skill or misconduct;
3.
4.
To use all reasonable diligence in communicating with the principal and seeking to obtain his
instructions;
5.
To pay to his principal all sums received by doing anything on his account, though in the course of the
agency business and without the previous consent of the principal, that is in the event of his doing so he
is liable to pay to the principal for the benefit, which may have resulted from the transaction. It may be
stated that it is not necessary to include these in an agency agreement as these duties are not subject
to any contract.
The agent has a right to certain monies in his hands held on account of the principal for the expenses
incurred by him in the course of agency business;
2.
3.
He has a right to adjust his commission or remuneration against the amount payable to the principal;
4.
All these rights are, however, subject to a contract to the contrary and therefore different provisions can
be made in the agreement of agency.
The principal is bound to indemnify the agent against any consequences of lawful acts done by such
agent in exercise of the authority conferred on him;
2.
The principal is bound to indemnify the agent against consequences of the acts done by the agent in
good faith though it may cause injury to the third persons;
3.
The principal is bound to make compensation to the agent in respect of any injury caused to such agent
by the principal's neglect or want of skill;
4.
These duties are not subject to a contract to the contrary and, therefore, they cannot be avoided by an
agreement.
Relevant Information:
Contracts lawfully entered by an agent on behalf of the principal are binding on the principal;
1.
What is done by the agent within authority is binding but what is done beyond authority is not binding on
the principal but if both the acts cannot be separated, then both the acts are not binding on the principal;
2.
3.
A contract entered into by an agent cannot be specifically enforced by him nor is he personally bound by
it unless where the contract is for sale or purchase of goods or from a merchant abroad or unless the
principal is not disclosed by the agent or unless the principal cannot be sued;
4.
In case of an undisclosed principal, the third party has the same right against the agent as he would
have if the principal was disclosed. Similarly, in such a case a third party would not be bound by the
contract if he could show that he would not have entered into the contract if he had known the principal;
5.
In the event of personal liability, both the agent and the principal would be liable.
6.
Even an act of fraud or misrepresentation done by an agent in the course of his agency business is
binding on the principal;
7.
These provisions are not subject to any contract to the contrary between the principal and the agent.
Sub Agents:
Sub agents are generally of three types
a.
Those employed without the express or implied authority of the principal and by whose acts the principal
is not bound;
b.
Those employed with express or implied authority of the principal but between whom and the principal
there is no privity of contract;
c.
Those employed with the express authority of the principal and between whom and the principal there is
a privity of contract and a direct relationship of principal and agent is accordingly established.
Types of Agency:
Sub agent;
Mercantile agent;
Factor;
Insurance Agent;
Director Agent;
Auctioneer;
Estate Agent;
Broker etc
Brief description:
Sole Selling Agent:
In case of sole selling agent, the relationship between the principal and the sole selling agent is more or less
of a seller and buyer and therefore, when a sole selling agent sells the goods to his buyer the relationship
between the sole selling agent and the buyer may be of the vendor and purchaser unless the agency is
disclosed.
Mercantile Agent
A mercantile agent is one having authority in the course of business to sell goods or consign goods for the
purpose of sale or to buy goods and even to raise money on the security of goods. A mercantile agent is also
called a commissioner agent.
Factor
A factor in ordinary course of business is entrusted with possession of the goods or with possession of
documents of title to goods;
Broker
He only brings about the transaction between the principal and the buyer or seller but the possession of the
goods or document of title to goods is not given to him. He is, therefore, an agent, who in ordinary course of
business is employed to make contract for the purchase or sale of shares or goods.
Estate Agent
An estate agent generally deals as intermediary in the transaction of sale and purchase of immoveable
property or in management of any property.
Auctioneer
An auctioneer is in law an agent of the person whose property is to e sold by auction through him. He also
becomes the agent of the auction purchaser when the bid is struck down in his favor.
2.
Managing Director;
3.
Manager;
The term of appointment of a Sole Selling agent cannot be for more than 5 years; though renewable.
2.
The appointment, as such, is subject to the approval of a general body of share holders of the company
prior to appointment or subject to ratification subsequent to the appointment;
3.
The terms and conditions of the appointment of a sole selling agent are subject to approval by the
Central Government, which has the power to vary the same in the event they are found to be prejudicial
to the interests of the Company;
4.
The Company can appoint more than one such agents, however, the Government has a right to declare
any of them as the sole selling agent of that area;
5.
A company cannot appoint as sole selling agent an individual, firm or body of persons if it has any
substantial interest in the company without the Government approval;
6.
A Company having a paid up capital of Rs. 50 Lakhs or more cannot appoint such agent without
Government consent;
No person can act as managing director for more than two companies;
2.
No managing director can be appointed for more than five years at a time unless reappointed;
3.
a managing director will not be entitled to remuneration for loss of office in cases as are mentioned
above in the case of a sole selling agent;
4.
monthly salary or other remuneration payable to the managing director are controlled by the Act.
In respect of Manager;
1.
The conditions that govern the appointment of a Manager are similar to the ones applicable to the
Managing Director.
Stamp duty:
An agency agreement, falling under the general item category of Article 5 of the Indian Stamp Act, would not
attract any specified ad-valorem stamp duty and is treated like any other ordinary agreement.
Registration:
Registration of the Agency agreement is not mandatory.